By Diondi Tan

'RISK' has long been considered a taboo word within the SME business circles.

Company managers take great pains to avoid any new moves for a business that involve significant risk, and shareholders shudder at the very mention of the word.

But like it or not, risk management is too important a subject to be ignored. And a firm will do well to know - and practise the three main steps involved in managing risks.

These three main steps include assessing the risks, developing strategies to manage the risks, and the mitigation of risks using various resources and methods.

Following these steps will ensure that whatever the consequences posed to the company by the presence of risk, they will be minimised as much as possible.

However, there is also the need to ensure that the effort devoted to managing the existing risks isn't consuming an inordinate amount of resources.

Otherwise, projects that are undertaken may experience a slowdown because of the resources being diverted, or find themselves unable to proceed past the risk-assessment state.

Steve Cunningham, senior vice-president at Marsh Inc (Singapore), an international company specialising in risk-assessment and management, says that '... businesses are exposed to different risks every day but the flip side of that situation is (the opportunity) to take advantage of that risk to grow your business. Risk is not a bad thing if you take your time to think it through and work out how to deal with that risk.'

Standing behind their 'find the upside in risk' motto, Marsh recently released their new web-based Risk Explorer tool, which is meant to enlighten SMEs on the possibilities for greater profit and expansion posed by risk, and to help them achieve this by assessing the risks that is threatening a particular company.

'By spending 15 to 20 minutes filling out the online surveys that make up Risk Explorer, SMEs can help themselves save money on their corporate insurance, and learn about ways to manage the risks they face,' explained Mr Cunningham.

This is indeed a far more efficient alternative for owners or managers who can't always afford to take time out (or money out of their budget) to engage in more traditionally styled risk-assessment programmes involving consultants, days of meetings and poring over old records.

Investing 10 to 15 minutes - sacrificing just one coffee break - can result in significant savings down the road. Of course, actual consultants would eventually need to be brought in to give more detailed examinations and recommendations to the managerial staff of the company.

However, as more and more businesses turn to the Internet as their resource of choice, more web-based surveys will be the very first introduction that they receive in risk-management and assessment.

The topics covered in the surveys include various facets of the current state of the business, such as what are the factors that can have an effect on the business, and what consequences of a change in the disposition of those factors would be, whether or not the appropriate insurance policies are covering the right departments of the company, what sort of personnel requirements there are and what the impact of external events would be on the day-to-day working of the business.

After completing the whole survey, a better assessment can be made of whether the current operating procedures are actually correct for the company, and what major factors can affect business are.

Recommendations can also be made on what can be done to improve the business practices if the optimal case has not been achieved, and appropriate steps to fix the problem at hand outlined.

One of the oft-repeated mistakes for SMEs that risk assessments also address is the issue of unsuitable insurance.

By undergoing the process, an analysis can be done on whether or not the company is under-insured - or whether it is over-insured instead - and that the proper policies are covering the right emergencies.

Streamlining business operations and choosing appropriate insurance policies will lead to quite a bit of money that can be saved or redirected towards other more useful uses.

Making sure that coverage exists for possible occurrences of natural disasters and unexpected setbacks is especially important for smaller businesses, which operate with less of a cushion than larger institutions.

Practising good risk management is a necessity for any business to become successful but it is especially important for SMEs due to their smaller nature.

Being able to start the process of protecting business - and stimulating it at the same time - for free is definitely nothing to scoff at.

This article was first published in The Business Times on 15 July 2008.